tv Bloomberg Markets Middle East Bloomberg January 14, 2018 11:00pm-12:00am EST
-- $5 billion this year. as donald trump insists he is the least racist person, the 's minister calls him an asteroid of awfulness. this is "bloomberg markets: middle east." i am yousef gamal el-din in dubai. u.s. markets close for mlk day. the asian session off to a strong start. the global map gives us the pulse. gains in the hang seng, up .6%. asx 200 up as well, .3%. on the foreign-exchange side, a move in the mexican peso off the back of positive whispers around ,he future outlook for nafta the yen rising to a high against
the dollar. some of it on governor kuroda's comments, but also short covering from traders. interesting moves in commodities. the weaker dollar feeding into these trades. 1.2%, leading the complex higher, even after china data missed expectations. let's cross the board and let me show you other key asset classes. brent crude, a lot of commentary , still new highest close in three years. more opec members calling for cuts to be kept through the end of the year. story.gain weaker dollar -dollar is one spot where it is not feeding through. the gains friday. as we come back from the
holiday, the earnings season kicking into higher gear. let's get you a preview of what will be coming up. we will speak live to an executive board member of the deutsche boerse bank. let's check in with first word headlines from around the world. donald trump is an asteroid of awfulness according to the uk's shadow foreign secretary. he lashed out during an interview with the bbc after trump called off a planned london visit to open a new u.s. embassy, saying he did not like the deal. >> he is an asteroid of awfulness that has fallen on this world. i think he is a danger and a racist. i don't want him to come to the country. i don't think he should have
been given an invitation. i think it was wrong for theresa may to give him a state visit. i think it hasn't burst the queen. president trump told reporters he is the least racist continues fromws vulgar remarks he reportedly made about african countries and haiti. president trump tonight using the language he is said to have spoken. rally mayay the pound come under pressure as germany sinks the hope that a soft brexit will happen. spanish and dutch ministers agreed to push for a deal that keeps the u.k. as close to the eu as possible, but lloyd's ceo says they are still planning for a hard brexit. >> we are still going full steam ahead on our plans. this will look after the business from the eu 27 market.
ofut 2 billion euros business for us. we are going full steam ahead as if it were going to be a hard brexit. saya: bloomberg sources saudi arabia's sovereign wealth fund is considering borrowing from banks for the first time. investment fund his said to have held talks with local and international banks and could raise $5 billion. saudi arabia is stepping up efforts to turn the tif into a global china giving you ownership of saudi aramco and what could be the world's biggest ipo. the iranian tanker that earned for more than a week has exploded and sunk. afternoon,n sunday leaving a 10 square kilometer oil spill. all 32 crew members are presumed dead. it collided with the carrier on january 6 that was carrying one
million barrels of condensate. of a plane that skidded off a runway in turkey say it is a miracle no one was hurt. boeing 737 ended meters from the sea following the incident. the carrier said there were no injuries among the 168 on board. the flight which came in from and now prosecutors are still investigating. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. i am debra mao. yousef: thanks. let's get back to the action. to the strengthened highest level against the dollar in four months this morning. governor kuroda pledged to maintain a massive stimulus, but remove the words "powerful" and
"aggressive." nomura said the potential for lsu changes are priced into japanese stocks. how to the comments fit into the wider context? >> everyone is sensitive about anything to do with comments from japanese officials right now. cheju a tantrum in the key market when the boj did not by as many bonds as it usually does, and now the move in the yen has been compounded by the comments from governor kuroda, who usually talks about powerful and aggressive easing, but this time just talked about using, so it could just be traders who are ultrasensitive right now. the boj is moving to a tighter policy, especially since the ecb hinted it might be moving writer as well, and with
the fed having done it, the world is watching to see if we will have the three major central banks heading in a hawkish direction at the same time, so all wording from the boj is in the next and traders are sensitive. yousef: one of the most read stories on the bloomberg is about how one twitter account is getting a lot of attention in japan. it is not so much what he tweets, but how quickly and how quickly it has become a critical element of pricing in certain asset class. talk about how this has developed. interesting, the fact using twittere has part of their investment decision. some people will be wondering why they just don't look at the is a forecasters, but it
fact of life that social media is being used, and sometimes good information is therapy for other sources. there is some fund to it as well, the fact that he is superfast. what really happened in the last six months is we have seen the global appetite for japanese assets has come back, especially in the equity markets, and people want to know more about japan. the big breakout we saw towards the end of last year for japanese equities appears to be gathering strength. japanese equities are doing well. it is about japan. people want to know more about what is going on and where japanese companies are making their money and any information moving markets. it is not just twitter, but anything to do with japan is in vogue. k inlittle tweet -- twea
the wording, people want to know about it. yousef: thank you again for coming on the show. let's bring in the vice president and senior investment bc bank out ofoc singapore. as you digest the latest comments from the boj, the softer tone dropping keywords like "aggressive," what does that mean for how you look at the japanese story for the rest of 2018? >> i think it is still early days. central banks at the beginning of the year, they would tighten policy and scale back on asset purchases. the boj has been behind the curve. governor kuroda does comments will be checked by the markets. what we have learned from the normalizationcle
expectations have a big impact on currency markets and mid cycle and late cycle tightening. thatts are expecting governor kuroda is signaling to markets that the japanese central bank is planning ahead in terms of scaling back purchases. is exactly what you saw in the currency market today, the yen strengthening against the u.s. dollar, so rhetoric will be closely tracked. yousef: on that note, we have put up on a chart what the yen has been doing. as it trades around november lows, and could test the key 110 to get into, i want other calls around the asia story. what are you telling clients in terms of positioning? you are upbeat on china. where else are their pockets
exciting from your standpoint? >> asia has done exceptionally well. in terms of equities here, they have done well. to 30%rease compared global average. having said that, we are positive on the singapore stock market. we think the revival in the property sector, high interest rates come issue go well for the banks, property companies, and offshore andven marine stock could benefit from oil prices, so there are pockets of opportunity in singapore. in indonesia, you see a gathering of pace. we are also positive in indonesia. we think it is another bright spot. china is a good story.
china his tackling the excessive leverage. it is opening up capital markets, making it more accessible, and that presents big opportunities. in the long term, china his an attractive proposition given that it is opening up. yousef: hard to get excited about asia, which you just said. citi says investors are favoring value over growth. you are sticking around. we want to continue our conversation. let's get you a preview of what is still to come. his saudi arabia about to borrow from banks? the sovereign wealth fund is talking to local and international lenders for the first time, seeking $5 billion this year. we will have the latest on that front. but first, the global equities
yousef: this is "bloomberg markets: middle east." we are live on bloomberg tv and radio. . am yousef gamal el-din let's run you through the market action from the last trading session in the middle east. dubai up .5%. intochip stocks feeding that ahead of the earnings announcements. we saw quite a bit of upside in the saudi arabian story, up 1.4% on the tadawul. investors are reacting to the latest news. given the suppliers involved, investors are embracing the fact there is a conversation about resolution than the standoff.
up .7%.lso let's talk again about the wider global story. 2018's strong start continues with asian stocks headed towards more record highs. this off the back of the global growth story. about optimism that will continue. focus afteronds and last week's roller coaster ride. we saw the yield on the two-year treasury note rising above 2% on friday for the first time since the financial crisis in 2008. the vice president and senior investment strategist at ocbc bank is still with us. you look at bond yields, a u.s. dollar, this thing won't wake up. where does the turnaround happen? the yield differential, the rate differential, is real, so there
needs to be some kind of response. >> no doubt. the yield differential is reviewed -- is real. you're talking about yields on u.s. treasuries and elsewhere. how view is that 10 year yields will head higher. if you think about what will happen, tax cuts in the u.s. taking place. , and taxdget deficit cuts had on to the budget. the supply of government bonds will probably increase significantly, so the long-term yields for u.s. bonds will go up. higher,lds are headed and that is something to bear in mind. the yield curve for 2017 was rather flat. there were concerns about the long-term prospects. if you look at tax reforms, that
will feel inflation and lead to the long end of the yield curve going up. it is not all that bad in that sense. yousef: from what we are seeing in the cold price, and there seems to be a shift in focus away from the inflation data and more towards the government shutdown talks. that is the next milestone for this administration. i'm quoting directly from bloomberg reporters who point at trumps unpredictability as negotiator and his him polls to rapidly reverse course is seen as a tail risk. >> no doubt. trump is a risk. , think his unpredictability but he has been full of rhetoric. he is not full of action. day, thed of the
markets are still driven by fundamentals. trump or otherwise, the u.s. economic for mental's, corporate profit earnings fundamentals, are still healthy. the raten terms of hikes you are expecting this year, 3-4. i want you to choose one or two and tell me when they are going to start. three,base scenario is likely to start in march. in case the inflation picture picks up in the u.s. again, they could actually feel inflation. it's possible that they are set to start in march because if they need to, they can do four. it is a risk we have in mind. the labor market is tight. tax cuts will feel inflation. that is something investors have to bear in mind. we think that is a significant
risk for 2018. when theill be choppy central banks changes its stance. if inflation picks up towards the 2% handle. yousef: where is volatility when you need it? good to have you on the show as always. thank you for coming on the program. we are just getting warmed up here at up next, could a driverless future mean safer roads? we will hear our interview next. this is bloomberg. ♪
benefits. >> a lot of this technology ,oday, connected vehicles vehicles talking to other vehicles, the infrastructure come all these technologies are starting to happen. a lot of the pieces of autonomy are going in as we sit here. they are about taking vehicle safer and more pleasurable to be in. we are not going to wake up one day and we will hit a switch. it will be incremental. we think the payback on this will be tremendous when we get here. it will change our business model in a way that we think will be really amazing. >> the efficiency will limit -- >> the profit per vehicle we think could be quite remarkable. replace at a to
cadence quicker than current vehicles. projections on sales, and they are all over the map. >> what about her emotional connection with the car? your family more than any family is associated with it. we all remember our first car. will that go away? >> no, it will not go away. will have their place, but the fun of owning a vehicle will still be there. we may not want to try that every day. ,f you live in an urban area you might prefer to have a vehicle seamlessly take you to where you want to go, but even that vehicle, we are focused on how do we personalize that so it is uniquely door ev and you have an experience that was unexpected and cool. a child bornl
today have to learn to drive in 2034? >> they may not have to come a they may want to. there is a joy and driving. i love to drive. not everyone agrees with that. >> finally, nafta, a big negotiation later this month. do you have a sense of where we are with nafta? a have a sense there is danger we will fall out of nafta? thatthink to do something rustic would not be something we support. nafta could be modernized. we could get some currency in the nafta, but nafta has been in place a while and has served this industry well. >> how badly would it hurt the ford motor company? >> the whole industry. our industry was built around the nafta. it depends what you mean. there is a continuum here, a
complete blowup, and then a modernization, something we would not be opposed to. again, this whole industry was built around the notion of nafta , and we have to be very careful with how much we tinker with it. >> let's go back to electric vehicles. what will happen to the oil industry, cobalt, lithium? what are the fx on other industries of this transformation -- effects of this on other industries? >> we have been in business 114 years. there have been tremendous shifts. my greatest hope, and my greatest focus, is making sure that ford is at the forefront of that so we are around another 114 years. yousef: that was the ford chairman bill ford speaking to bloomberg television. let's give you a tease of what is coming up next.
yousef: let's check in on the first word headlines with the debra mao. trump is and ashtray don't awfulness according to the uk's shadow foreign secretary. emily thornberry flashed out at the president during an interview with the bbc after trump called off a planned london visit to open the new u.s. embassy. he is an asteroid of awfulness which has fallen on this world. i think that he is a danger and a racist. i don't want him to come to the country. i don't think he should have been given an invitation. i think it was wrong for theresa
may to premier league give him and in the tatian. i think it in paris the queen and was embarrassing for her. meanwhile, president trump told reporters he is the least racist person as the following continues from vulgar comments he reportedly made. trump denies using the language. say the pounds rally may come under pressure this week. a high fridayd to after spanish and dutch finance ministers agreed to push for a deal that keeps the u.k. as close to the eq as possible, but germany may pour cold water on lloyd's ceo says the insurer is to planning for a hard brexit. still going full steam ahead on our plans to open in brussels. this will look after the business from the eu 27 market. businessillion euros
for us. we will be up and running by the first of january 2019. debra: global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. i am debra mao. let's get over to sophie kamaruddin for a look at today's market action. >> no monday blues. shares in mumbai extending gains. ahead ofclimbing indian host so prices. we did have indonesian export growth. the rupee has advanced. at the highestan level in three years has the dollar falters. the hang seng rally pushing to its best close ever, even before earnings get underway. sands china leading the hang seng, rising with other macau
casino operators after being upgraded. energy and property stocks on the retreat. firms cutng after prices. i want to check on softbank shares. the stock jumped as much as 5.8% after saying it is considering an ipo for its mobile unit, which has been debated for years as a move to raise cash. shares up 3.5%. an estimated enterprise by you of $71 billion, so still big plans ahead there. yousef: thank you for that. let's talk about what's happening at the asian financial form in hong kong, bringing together leaders in politics, business, and finance. our next guest overseas banking supervision. let's cross over to the event.
the deputy governor at the deutsche bundesbank joins us now. big news you announced this morning that bundesbank will in its reserven basket. is this categorically a new development? or is this part of what the ecb announced in june? balanceve different sheets. i can only talk about our balance sheet. in the middle of last year we made the decision in the bundesbank to include the renminbi. i cannot talk about the amount we will be investing in the technicalities and how we will be investing, but we have been in touch with our colleagues from the pboc about this.
the ecb go first. that is the right way to do it. other central banks moved before the ecb. thought this should also be part of the german currency reserves. amount, butmajor something we decided on and want to be part of, so the fact the roman the is included in the sdr basket and the fact -- the renminbi is included in the sdr basket is one of the factors in including it. >> with the sdr inclusion, you probably had concerns the currency is not a free floating currency. it has restrictions and there are strict capital controls in china. do you share these concerns? >> yes, we do. nevertheless we may have part of
our moneies to the imf in renminbi, so we need accounts and need to meet our obligations as the fourth largest member of the imf in remember the -- in renminbi, so we have made that decision. it does the fact we have decided to go forward. >> sometimes a journalist has to ask the most obvious question. why included at this time? >> it is now part of the sdr. it is part of for quota potentially in renminbi and because of the ecb investing in central banks in the eurozone. >> does it also represent growing financial clout that china has and the need for trade financing and you want to have this currency? >> as the central bank, you have
a currency in your currency reserves to the extent you need it. that wet necessarily need it to fulfill our obligations as a central bank, but we also want to have the currency, thats we want to understand the market of government bonds, etc.. we do share concerns that the imf has come so the answer is to yes is -- two yes's. >> do you have any clear indication china is liberalizing? >> it is their decision. it depends on how quickly they want to do this. they are internationalizing. the renminbi is much more used than it was before. still there are obstacles. sometimes there are interventions. it is not 100% predictable what
kind of regulatory changes you have, so there are some obstacles to using the renminbi, and order to make it a more used international currency, more needs to be done. the renminbi does not have an anchor currency status as the u.s. dollar, the yen, the euro, or the pound. --the biggest optical's obstacles would be the limits. >> yes, but it is increasing through the initiative because the trade links with china will intensify, and now foreign ownership has been liberalized in china. up to 51% of a financial institution, not only 49%. all of this will make the renminbi a more international used currency in the future. >> is this a plan being put forward?
or is this starting out that the bundesbank will accumulate renminbi? decisione made that quite some time ago and will execute our plans and the way we think it, and we will do this coordinating with the pboc. >> let's talk in broader terms about central banks and the uncoordinated into two asset purchases. should the ecb in your estimation set a definite ending for bond purchases? europe is muchin stronger than it was. growth has really returned to europe. it has also now a positive impact on the labor markets you would have hoped for, and the sentiment in many countries including germany is at an all-time high. all of this means the economy is growing. next year, above trend.
it also means we are closing the output gap and going in the right direction. this is the background for any monetary policy decisions. happen, wes going to have to be clear about the fact that we are still in a very expansionary monetary policy, which is justified because the inflation numbers are not there yet. they are not as negative, but inflation has had ups and downs and they are not fully at the price stability target. nevertheless, while we are talking about not breaking the car, but taking the foot off the gas pedal. we will still be ending, but an end date to those asset purchases would be justified given the economic background i described. >> they should set a tape --
date for tapering or some sort of deadline? >> that is what we feel should happen, and i personally would argue for that. >> the ecb pledges to keep interest rates at the level they are now until well past the end of asset purchases. that is quite vague. what do you think "well past" equals? >> ipo not enter this debate come but we are not talking about exiting the stance, but how much longer will be ecb be buying in the market. whilst this amount has been reduced in half since the beginning of this year, this month, you would still need to see how much longer are you talking about, these extraordinary asset purchases, and may be an end date would give a change to the for guidance and give the market a
better understanding of what we are talking about. , now we can switch gears implementation. are you concerned that authorities including the european commission could water this town? the basel deal is done. this is a compromise. many people in the united states are not happy with his phone number they feel. many people and europe think this is too high. this compromises hurting all sides, which is normally a good indication this is a reasonable compromise. we have regulatory certainty now. the europeans have insisted including germans that the united states commit to fulfilling all parts of basel. this means the europeans need to implement all parts, otherwise that would be an unfair stance. from our point of view, we think the real implementation everywhere is very, very
important and is crucial for having regulatory certainty. >> do you feel the basil committee will formulate a position on cryptocurrency? >> that is not in the price at all. >> should it be? >> the word currency and this is something you can debate, whether that is right. now i don't think this is something right now for the , but of course the central bank community is thinking about its stance and what to do. so they are debating this. it is a very important issue. my personal feeling is the following. size of bitcoins is not very large, kicked his
growing at a high speed, and clearly there is some satisfaction with the quality of electronic and digital payments. the fact that globally cash is being reduced and digital payments are being increased does not necessarily mean you have to go towards cryptocurrency. some things we have in working on in the german central bank has been to think about the underlying technology. in 2016, we developed a lock the german stock exchange to better understand what kind of technology is behind of this. are working with different payment and transfer systems to make this more efficient and effective as a market. so something needs to be done, but it doesn't necessarily need to be a cryptocurrency. >> thank you so much. that is it now from -- for now
from the asian financial form. yousef: thank you for that. let's get you some breaking , the from emaar properties heavy weight on the dubai index. ofouncing a special dividend 42 of share in january. they will pay an additional one billion in dividends following approval and april. this is a stock that had quite a rally. analysts very positive on this story. it also have preformed in terms of price targets, well above in terms of how analyst expected to go forward. for as one to watch out we go into the trading day. some other key themes, saudi arabia sovereign wealth fund weighing whether to borrow from banks for the first time as it aims to become a $2 trillion
investment china. it could raise $5 billion from local and international vendors this year. i'll reporter has been working with key sources on this story. -- our reporter has been working with key source on this story. what is the latest? >> international and local banks are starting to have conversations with the public investment fund. the idea being they would try to use leverage to get the massive projects and investments done. when we had an interview with the head of the public heestment fund in october, said this was an idea they were starting to look at, how they could use leverage to boost investment returns. we are starting to see that strategy play out. of the splitrms
between local and international banks, do they have a preference? in terms of deploying the capital, will it be a domestic focus, or with they put assets into innovation stories? early days.ry they are holding preliminary discussions with lenders to gauge appetite. banks,lear the domestic loan growth has been slow. there is very little credit demand from the saudi private sector. the local banks would be keen to , essentiallyhe pif lending to the government, and international banks as well given how active the pif is likely to become. the international banks would be relationship,that
that those banks are help to structure and fund those deals, so there will be a lot of appetite for pif borrowing. yousef: thank you very much. let's go to the head of investment strategy at hubble dobby --abu dhabi commercial bank. you hear what the pif is doing and see what the saudi government is doing in terms of refining and recalibrating its america thingsof the government spending will come in higher than some of the forecasts. how does the place you in terms of putting money to work in saudi arabia? >> saudi arabia is a long-term reform story. if you look at for instance the msci inclusion of uae a couple , thears ago, we were market was late picking up on qatar.ory
in the case of and the uae, when the inclusion and waiting list was announced, there was a faster pickup. saudi arabia is a much bigger country and there are many more variables there ongoing. as good asion is not a couple of years ago in terms there isl price, but much more potential of diversification in saudi arabia than anywhere else. andoil price has picked up consolidation is still on track in saudi arabia. yousef: i'm going to quote straight from the report from boa merrill lynch saying saudi authorities may have underestimated the cost of handouts and are pointing out that raises the risk profile. so you clearly disagree with that and you are saying consolidation is still happening at a level where you are comfortable? >> you need to look at it from a
longer-term perspective. we are not thinking had an equity level, earnings growth. you are thinking about the multiple expansion because there is a story to sell. as long as the dollar remains relatively weak, and i believe it will remain weak for the next six-time months, -- next 6-9 months, conditions and the gcc will remain quite good. we have seen the access of foreigners to capital markets have been come the restrictions have been relaxed. msci has broadened that. long-term, the fiscal budget plan makes sense. there have been measures to of eva the poor families. have the -- to give alleviate alleviates -- two it there will be disappointments
third 2018 as far as the deficit is concerned, but over a longer trajectory, this is a story of reform. it's not that the deficit has been compromised. yousef: speaking of reforms, what is happening with capital markets over there? we have put up a chart with of items and momentum since saudi stocks, 6473. we added the 30 day trendline as well. slightly lower volumes in 2017 than 2016. that does not speak to success in bringing foreign money in. >> it is clearly still an out-of-favor attitude. a lot has to do with the fact that if you look at emerging markets earnings expectations for next year globally we are in the double digits. in this region, upper single digits. there are still concerns about geopolitics. it is a negative.
you feel it. the oil prices go down, and the fromd goes up, so it went 122 130. it is difficult to forecast when the change in mood will occur. the elements are in place. it just takes time. it would need more indications from the government. we need to have some clarity on the aramco ipo. this will be the mother of all ipos. the big story about saudi arabia is you will have a descent is that are not well represented beyond the usual finance, real ipo, this you need an aramco ipo. it needs to be an international listing, not local. that is what the markets are waiting for. yousef: i know you have some strong calls.
one key call on the broader emerging markets space, new set of south africa, we are hearing sharper rhetoric towards mr. zuma. we could be getting ready for a fight there. how do you feel currently about what is going on over there? >> globally emerging markets are still sort of in a sweet spot because of the dollar likely remaining week through 2018 -- weak through 2018. i don't see the need to go into south africa. mr. zuma could hang out until 2019. we don't know if the alternative will be such a good deal. he also talks about economic empowerment, which basically , sos property confiscation there are doubts about south africa. there are currencies that are shaky like turkey that will profit from a stronger euro, and then countries like russia,
indonesia, so why go to south africa? i don't see the need if you look at the overall emerging markets space. yousef: always a pleasure to have you on the program. thank you for stopping by. the head of investment strategy at abu dhabi commercial bank. coming up, the middle east market open. watchre the key stocks to out for, find out next. this is bloomberg. ♪ this is bloomberg. ♪
total return has been underperforming the benchmark dubai index. consensus price target 62% lower than the current price. again, up 4.7% over one year. , a reshuffle. lawmakers have approved the report and of a former senior bank official as tourism industry. that is one of four changes after some of those amendments. he is whether this will bring fresh momentum. that remains to be seen. investors will be keen to see fresh ideas to reinvigorate that sector. also, we have november trade data for the euro-area. greek voters going to the ballot box to vote on a bill. u.s. marks its -- markets close
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